Pathways to Success

Recently there have been major write-ups on tech companies that have pursued very different strategies to achieve their desired financial results. The contrast between blue chip IBM and Software as a Service (SaaS) pioneer Salesforce.com is remarkable. Box.com, one of the newer cloud storage and file sharing services, is charting yet another course.

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Why IBM is in Decline. IBM, under the realm of CEO Samuel J. Palmisano from 2002 – 2011, doubled earnings under a plan called Roadmap 2010 and is on schedule for a repeat with Roadmap 2015. This extreme focus on profitability and wooing investors has left a trail of wreckage for new CEO Ginni Rometty, who, inexplicably, seems committed to follow the same path. Catastrophe may be looming for one of America’s greatest brands. The singular and narrow focus on quarter over quarter, year after year earnings may not be sustainable in the long term. There are many cycles in the economy and in business that may not fit this smooth curve approach. Also, while meeting short-term profit goals, IBM is paying the price in terms of low employee morale, suffering customer service, lack of innovation and lagging technology.

What is the right balance? How do mature companies continue to fuel innovation and growth while also serving their shareholders? How do you allocated monies in your budget for innovation and growth while also delivering bottom line results? Is there a balance of investments in people and customers to achieve long-term sustainable success?

A moderate approach that may serve both maverick and mature companies equally well is based on the patient use of capital and a balanced portfolio. Companies that plan seeds now for growth that will be ready for harvesting in three, five or ten years will experience some ups and downs, but the overall trend will be positive.